The US And Germany Have The Advantage Of Funding Government Debt at Negative Interest Rates

This article was based upon a presentation at an economics conference. The presentation was an historical review of how negative real interest rates helped the US and the UK to recover from government debts that financed WW II. In a sense, negative interest rates are like an increase in government income. It enables governments to borrow money below its real cost. Some of that is due to unanticipated inflation, and some is due to government policies.

Germany and the US are able to borrow money today at negative interest rates. This is helping them to finance their debt. Other countries have the the opposite problem. Italy, Spain, Ireland and Greece have to fund their debt at high interest rates. There is a demand for safe assets and investors are using German and US debt as a place to store their their wealth.